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The Amenity Value of Climate to German Households


  • Katrin Rehdanz
  • David Maddison


This study uses the hedonic approach to measure the amenity value of climate in Germany. Unlike in earlier research separate hedonic wage and house price regressions are estimated for relatively small geographic areas and formal tests undertaken to determine whether the coefficients describing the impact of climate variables are homogenous across these areas. Evidence suggests that German households are compensated for climate amenities mainly through hedonic housing markets. Given that climate is largely unproductive to industry and few industries spend more on land than labour this is consistent with what theory would predict. Throughout Germany house prices are higher in areas with higher January temperatures, lower July temperatures and lower January precipitation. In East Germany wages are higher in areas with higher January precipitation. The full implicit price of climate variables however is very uncertain.

Suggested Citation

  • Katrin Rehdanz & David Maddison, 2004. "The Amenity Value of Climate to German Households," Discussion Papers of DIW Berlin 414, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp414

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    References listed on IDEAS

    1. Maddison, David, 2003. "The amenity value of the climate: the household production function approach," Resource and Energy Economics, Elsevier, vol. 25(2), pages 155-175, May.
    2. Graves, Philip E., 1980. "Migration and climate," MPRA Paper 19916, University Library of Munich, Germany.
    3. Cragg, Michael & Kahn, Matthew, 1997. "New Estimates of Climate Demand: Evidence from Location Choice," Journal of Urban Economics, Elsevier, vol. 42(2), pages 261-284, September.
    4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    5. Schnare, Ann B. & Struyk, Raymond J., 1976. "Segmentation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 3(2), pages 146-166, April.
    6. Jeffrey Englin, 1996. "Estimating the amenity value of rainfall," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 30(3), pages 273-283.
    7. Maddison, David & Bigano, Andrea, 2003. "The amenity value of the Italian climate," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 319-332, March.
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    Cited by:

    1. Eckhardt Bode, 2008. "Delineating Metropolitan Areas Using Land Prices," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 131-163.
    2. Gary W. Yohe & Richard S.J. Tol, 2007. "Precaution And A Dismal Theorem: Implications For Climate Policy And Climate Research," Working Papers FNU-145, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2007.
    3. David Albouy & Walter Graf & Ryan Kellogg & Hendrik Wolff, 2010. "Aversion to Extreme Temperatures, Climate Change, and Quality of Life," Working Papers UWEC-2011-03, University of Washington, Department of Economics.
    4. Denis Gerstorf & Nilam Ram & Jan Goebel & Jürgen Schupp & Ulman Lindenberger & Gert G. Wagner, 2010. "Where People Live and Die Makes a Difference: Individual and Geographic Disparities in Well-Being Progression at the End of Life," SOEPpapers on Multidisciplinary Panel Data Research 287, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Weiß, Dominik, 2010. "Kompensieren Mietpreisunterschiede ungleichwertige Lebensverhältnisse?," Arbeitsmaterial der ARL: Aufsätze,in: Gleichwertigkeit der Lebensverhältnisse zwischen Politik und Marktmechanismus: Empirische Befunde aus den Ländern Sachsen, Sachsen-Anhalt und Thüringe, pages 71-95 Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften.
    6. Paul Cheshire & Stefano Magrini, 2006. "Population growth in European cities: Weather matters - but only nationally," Regional Studies, Taylor & Francis Journals, vol. 40(1), pages 23-37.
    7. Zhou Yuan & Richard S.J. Tol, 2005. "Water Use in China’s Domestic, Industrial and Agricultural Sectors: An Empirical Analysis," Working Papers FNU-67, Research unit Sustainability and Global Change, Hamburg University, revised Jun 2005.
    8. Rehdanz, Katrin & Maddison, David, 2005. "Climate and happiness," Ecological Economics, Elsevier, vol. 52(1), pages 111-125, January.
      • Katrin Rehdanz & David J. Maddison, 2003. "Climate and Happiness," Working Papers FNU-20, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2003.
    9. Paul_Cheshire & Stefano_Magrini, 2004. "Population Growth in European Cities: weather matters – but only nationally," Urban/Regional 0410001, EconWPA.
    10. Bode, Eckhardt, 2006. "Commuting, externalities, and the geographical sizes of metropolitan areas," Kiel Working Papers 1289, Kiel Institute for the World Economy (IfW).
    11. Hamilton, Jacqueline M., 2007. "Coastal landscape and the hedonic price of accommodation," Ecological Economics, Elsevier, vol. 62(3-4), pages 594-602, May.
    12. Weiß, Dominik, 2008. "Mietpreise und Lebensqualität: Ist das Wohnen in Ostdeutschland wirklich günstig?," IWH Discussion Papers 12/2008, Halle Institute for Economic Research (IWH).
    13. Ernest Molua, 2012. "Climate extremes, location vulnerability and private costs of property protection in Southwestern Cameroon," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 17(3), pages 293-310, March.

    More about this item


    Climate change; Germany; Hedonic pricing;

    JEL classification:

    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
    • R29 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other

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